SOMETHING FOR NOTHING?
Seldin, Joseph
The Trading Stamp Boom: Something for Nothing? by JOSEPH SELDIN IT MAY be startling news to the fifty million housewives busily pasting gummed stamps in trading stamp books, but the U. S. Supreme...
...Meanwhile, the stamp companies are making hay...
...Stamps arrived by mid-1951 and within a year four of the local six food chains had them...
...No wonder one supermarket own;: er wrote to Super Market Merchandising that "the end result of trading stamps is exactly the same as putting a two per cent tax on everything sold in food stores...
...In 1955 the population had risen to 750,000—but only 1035 food stores were left to feed the Denver area...
...She pays either in higher prices, or, more subtly, by the disappearance of certain loss leaders and shopping day "specials...
...Premium Practice, trade journal, indicated the enormity of growth by reporting recently that retailers paid out 75 per cent more for stamps in 1956 than in 1955...
...Most modern women, of course, do not keep chickens in the yard...
...Years ago the "clever housewife hoarded 'egg money' so that she could buy luxuries without asking for her husband's consent...
...There is some evidence that they do—and also that they don't care . . . This . . . leaves no doubt that trading stamps will flourish as long as they remain legal...
...Both the A. & P. and Grand Union, the two oldest JOSEPH J. SELDIN is a Now York consultant in advertising and promotion and a frequent contributor to American magazines...
...Considering the nearly f 1,000,000,000 volume, either percentage leads to a staggering windfall...
...As is usual when an entrenched part of the business world is threatened, the organized retailers are trying to halt the stamp juggernaut by the police power of the states...
...For example, Sperry & Hutchinson, oldest and largest stamp company, issued a 48-page catalog listing 1500 consumer products obtainable at any of the company's 400 redemption centers scattered around the nation...
...However, this legislative and licensing approach to the stamp ogre has the usual dangers to democracy of all special interest legislation...
...A Brooklyn merchants association calls stamps "nothing but a racket," the New York State Food Merchants Association finds them "economically unsound," and another organized retailer group charges stamps with "gouging the public...
...Soon so many food stores were distributing stamps that a few broke away from standard practice and began to offer multiple stamps...
...The result was a ghastly toll of the food stores in the Denver area...
...When the epidemic first began, they jubilantly reported sales boosts of 30, 40, and 50 per cent...
...Phenomenal profits are piling up...
...Is she paying for the "free" premiums in higher food prices...
...At $10 to $15 for 5,000, depending on quantity, the retailer pays two to three cents per stamp...
...As for the retailers, they are not happy over the stamp craze...
...In fact, the volume of trading stamps being printed far surpasses the total output of the U. S. Postoffice...
...The situation was summed up by the Journal of Commerce in these words: "The tiny trading stamp is rocking the retail food industry in the most bitter competition since the depression days of the early 1930's...
...Tide, an advertising trade publication, suggests still another facet to the answer...
...The consumer foots the entire bill—including the profit margin...
...by JOSEPH SELDIN IT MAY be startling news to the fifty million housewives busily pasting gummed stamps in trading stamp books, but the U. S. Supreme Court as long ago as 1916 denounced trading stamps as "an appeal to stupidity...
...All the stamp plans operate pretty much the same way...
...For trading stamps are no different intrinsically from any of the tricks designed to snare the contents of the consumer's pocket-book...
...The great rush started when the giant food chains moved in a scant year or two ago...
...The housewife's filled book of 1200 stamps thus represents a value of $2.40 to $3.60 paid in by the retailer...
...All are intended to wear down consumer resistance to buying...
...No one knows what the exact figure is...
...Housewives are warned that stamp plans are "a hoax" and "no more than legalized robbery...
...Stamp companies claim a redemption rate as high as 90 to 95 per cent...
...This more than met the average cost of stamps—two per cent of gross sales—and, in addition, provided a thumping good profit from the extra sales...
...This should come as no surprise to the shopping-wise...
...The ads also appear in hundreds of major-market newspapers around the country, and recently blossomed into TV commercials...
...retailers say 60 to 70 per cent is probably closer to the truth...
...Sidney Margolius, consumer expert for the Machinist, publication of the International Association of Machinists (AFL-CIO), advises housewives: "If you confine your shopping to stores that give stamps...
...The use of trading stamps as a sales booster is hardly new in retail merchandising...
...Third, the biggest profit—and the least talked about by the stamp companies—undoubtedly comes from unredeemed stamps...
...They also acquire many luxury items for "nothing" that their conscience would not permit them to buy...
...That trading stamps represent a potentially uncontrollable economic force is illustrated by what has happened in Denver...
...The percentage of trading stamps that never turn up at redemption centers to claim merchandise varies, depending on point of view...
...Today, 400 or more stamp companies are hauling in an estimated 1800,000,000 to $1,000,000,000 yearly...
...Is her family weekly food bill the same—or higher...
...Even the U. S. government, through its Federal Trade Commission, the Anti-Trust Division of the Department of Justice, and Senate Small Business Committee, has intervened with investigations...
...Since the average price of an item that one book will "buy" is less than $3, the stamp companies make an initial profit on the sale of stamps...
...As competitive stamp plans .fought for the available food dollars, the sales boosts began to flatten out...
...The range of stamp-redeemable merchandise is wide...
...Stamps are simply a promotional tool in addition to the customary colorful packaging, breakfast cereal premiums, soap coupons, prizes, billboard advertising, newspaper and magazine spreads, radio jingles, TV spectaculars, contests, giveaways, and the like...
...The habit of saving stamps helps women to feel thrifty...
...The best evidence of this sudden wealth is to be found in the multi-million dollar advertising campaigns recently launched by the competing stamp companies...
...The evidence is strong that the housewife is paying for every cent of merchandise that she happily carries home from the redemption center...
...That this is an expensive process is shown by the U. S. Department of Agriculture calculation that more than half of the retail price of food goes for processing and distribution...
...But the situation took a turn for the worse, the trade publication, Super Market Merchandising, reported, when the competition "began to fight fire with fire...
...In this survey, prices averaged more than three per cent lower in the supermarket without the stamps...
...Full-page ads are appearing regularly in Time, Life, Newsweek, U.S...
...The housewife shopping for the family groceries gets one stamp with each ten-cent purchase...
...As to why trading stamps have such an irresistible appeal to housewives, the Stanford Research Institute says there are two reasons...
...However, they have found another way to achieve financial independence...
...The Denver lesson has not been lost on retailers...
...A few months later the fifth chain succumbed...
...If the outcome is successful there, the way would be open to all states to end the stamp problem very simply—by taking the windfall profits out of it...
...As an example, Top Value Enterprises, a less-than-two-year-old stamp company, recently spent $1,250,000 in a single month's advertising...
...Second, the stamp companies buy premium merchandise at wholesale prices, "sell" at full retail list prices, and pocket the substantial difference...
...And the executive secretary of the Associated Food Retailers in Chicago castigates stamps as "prostitution at best and economic insanity at worst...
...The difference in cost is just about two per cent, and equal to the value of the premiums . . . The best money-saving shopping technique, and the one that trading stamps are aimed at coaxing you to abandon, is to compare values and specials offered by the different markets in your neighborhood each week and go to the store that has the best buys, whether or not it gives stamps...
...Comparing the total cost of 30 food and household items at a supermarket offering stamps with a supermarket that does not, Margolius finds: "The items cost $10.26 at the chain that doesn't give stamps, and $10.48 at the one that does...
...Somewhat later, the United Cigar and Schulte Cigar companies tested the use of coupons as cash discounts...
...Another stamp company printed 25,000,000 stamp redemption catalogs, probably the largest single printing order ever placed by an American company...
...News b World Report, Better Homes b Gardens, Ladies' Home Journal, and Good Housekeeping...
...The Schuster Stores in Milwaukee are credited with introducing the first formal stamp plan in 1891...
...The source of these profits is three-fold...
...Margolius' price findings tie in with the findings in a survey, which I conducted, of two supermarkets, one giving stamps and the other not...
...But is the housewife really getting something for nothing when she redeems her stamps for a toaster, iron, mixer, and other merchandise...
...They collect trading stamps...
...As of today, six of the ten largest supermarket chains give trading stamps with merchandise...
...you very likely will pay more in the long run than you gain in premiums...
...The latter strategy is aimed at taxing the stamp companies out of existence...
...Just as effective are the legal suits brought by several states under the escheat laws to require the stamp companies to turn over the money from unredeemed stamps to the states...
...She pastes each stamp in a redemption book, and when she saves 1200 stamps, her book is filled...
...One book can be redeemed for a good bed sheet, twenty books for a power mower...
...First, they profit on the sale of the stamps to retailers...
...But the significant point is the fact that every bit of every promotional cost is incorporated into the final retail price...
...Before berating the nine wise men for an unchivalrous decision, housewives would do well to consider the revolution their squirrel instinct has caused in the retail food business —and the higher food prices they pay as a result...
...He is working on a book analyzing the workings of the advertising industry...
...nor can anyone keep track of the multiplying stamp companies springing up around the country...
...But main reliance is on state fair trade laws (on the legal ground that stamps are actually a reduction in price) and, even more, on licensing the stamp companies to do business in a state...
...One such case is now before the New Jersey Supreme Court...
...Do the millions of women now religiously pasting stamps in books pay higher prices for food as a consequence...
...Thereafter, for sixty odd years, stamp plans were used infrequently and principally by small and medium-sized retail food stores...
...Of the products shown, 526 are well-known brand items, including names Hke General Electric, Westinghouse, Cannon, Alexander Smith, Spaulding, Kodak, Ansco, and International Silver...
...Progressive Grocer, a trade publication, reports one stamp company opened its doors in April 1955 and rocketed to $30,000,000 in stamp sales in a single year...
...food chains in the United States, offered premiums as far back as a hundred years ago...
...In 1945 there were 1400 food stores serving about 485,000 people...
Vol. 21 • May 1957 • No. 5
